Whiting column: Institutional personal responsibility an uncommon characteristic.
We should be personally responsible, but the concept is both valid and uncommon for the myriad of our societal institutions.
The recent news that Garfield County and the other area taxing districts have to repay $5.7 million, plus interest, to Encana, provides a great example. In 2014, because Encana reported production in excess of actual production, they overpaid their property taxes. It was their error, not the county’s. Upon discovery, Encana requested reimbursement, which the county denied since the money had been budgeted, spent and it was Encana’s error.
The judicial system and the Colorado Supreme Court supported the concept that companies can receive reimbursement based on their own errors. Not only must the $5.7 million (approx. one half of 1 percent of their 2017 revenue) be repaid, but the amount accrues interest at the rate of 1 percent per month (12 percent per year).
Encana had an opportunity to role model institutional responsibility. No one denies they overpaid, but it was a result of their own negligence. We all make mistakes, but as individuals we learn to own up to them, apologize and make it right. Encana has chosen not to do so. They are actually benefiting from their own error, because the interest rate of 12 percent is significantly larger than the rate of return they would have made elsewhere. It’s to their benefit to over-report and receive reimbursement plus interest a few years later.
If we give Encana the benefit of the doubt and assume it wasn’t on purpose, they should do the right thing and not only refuse to accept the $858,000 in interest, but acknowledge their error and deal with it internally as any other individual or small business would do. Even settling for 50 percent of the error would show a modicum of institutional responsibility.
Encana is not alone in opportunity to demonstrate institutional responsibility. Pharmaceutical companies inflating prices beyond a reasonable level are another example. The price of cancer drug Lomustine went up 1,400 percent even though it has been around 40 years. Deflazacort, which is effective against muscular dystrophy, costs $1,000/year in Canada, where price is controlled, but $89,000/year in the USA. There are numerous other examples.
Medicare is prevented, by law, from negotiating prescription drug prices. This law needs changing, because price competition and freedom of choice are an integral component of a capitalistic economic system, but that is another issue.
When people are critically ill, fighting for their life, negotiating a price isn’t, nor should it be, a top priority. Institutional responsibility would dictate the company charge a reasonable price, regardless of an individual or Medicare’s ability to negotiate.
The recently adopted corporate tax reductions provide opportunity to not only share the windfall by raising employee wages, as a few have done, but by increasing shareholder dividends and/or lowering prices to consumers. Such would not only be institutionally responsible, but also provide an economic spending boost far in excess than would occur by increasing executive compensation or buying back stock. Using the tax savings to retire debt would also free up more money for spending, as well as facilitating expansion.
The various tax supported institutions have numerous opportunities to demonstrate responsibility. Many businesses, long ago, saw the advantage to and adopted the zero-based budgeting concept, in which the budget goes back to 0 each year. Every dollar must be justified if it is to be included in next year’s budget. This is more efficient than automatically having the new budget’s starting point be last year’s budget with the next budget be a percentage increase. Such would be a responsible strategy for tax-supported institutions.
Business has also taken this one step further by adopting zero-based job descriptions. Each year, every employed position must not only specifically delineate the needs to be met, but how they will meet those needs both in function and time. All tax-supported institutions have a tendency to always add to their employee kingdom even though functional needs change and technology increases efficiency. It would be responsible for them to adopt zero-based job descriptions.
Tax-supported universities could not only fulfill their responsibility to taxpayers, by adopting the complete zero-based concept, but also their responsibility to their clientele: students and their parents. Most fall and spring semesters comprise 72 classroom days, with eight semesters (four years) producing a bachelor’s degree. The summer semester is typically less than half a regular semester, around 25 days, consequently not a great help in reducing time. If the summer session were also 72 days, the student could choose to graduate in three years and reduce the expense of room, board, fees, travel, etc. by 25 percent from the traditional four-year experience.
This scenario still provides ample “vacation” time for both students and faculty. Three 72-day semesters = 216 days; 52 weekends = 104 days; a total of 320 days. This leaves 45 vacation days or nine weeks plus weekends; significantly more than the 10 days or two weeks the average employee receives.
The three-year scenario would not only save money, but be educationally motivating and increase graduation percentages. It also provides choice. The student could choose the traditional four years, working between sessions or graduate in three years, beginning their career as quickly as possible.
Additional logical examples will be discussed in the next column.
We, as taxpayers and consumers, should demand institutional personal responsibility. It is, however, still up to the individuals running the institutions to make it happen. We can pressure them with our spending dollars, our presence at stockholder meetings and most importantly, through social media.
If we make the institutions more personally responsible, it might motivate us to do the same in every aspect of our own lives.
Bryan Whiting feels most of our issues are best solved by personal responsibility and an understanding of non-partisan economics rather than by government intervention. He recently retired after 40 years of teaching marketing, entrepreneurship and economics. Comments and column suggestions to: email@example.com.